Shortly after the close of trading on Friday, a round of debt talks between House Speaker John Boehner and President Obama collapsed.

Lawmakers scrambled Sunday to cobble together a debt deal before Asian markets opened for trading, but failed. Instead, negotiations faltered and both parties indicated they would pursue separate legislative tracks.

If Congress fails to raise the $14.3 trillion debt limit, Americans could face rising interest rates and a declining dollar, among other problems.

Ladwa said the broad implications of a potential default have not been considered by investors.

"I don't think world markets have fully factored in the severity of a U.S. default," he said. "It's not just a big deal for the U.S. It has huge implications across the globe as well."

Bond prices dropped Monday, pushing the yield on benchmark 10-year notes up to 2.99% as investors continued to give Washington the benefit of the doubt.

It's not clear exactly how the bond market will react as the debt ceiling deadline approaches. Some traders think yields may stay low as investors seek out tradition safe-havens. Conversely, the specter of default could cause a flight from Treasuries to other assets.

ETrade (ETFC)'s stock jumped more than 5% on talk that TDAmeritrade (AMTD) may consider a bid for the online brokerage. Late Friday, Etrade retained Morgan Stanley (MS, Fortune 500) to look at strategic alternatives.

After the market close, investors will get results from chipmaker Texas Instruments (TXN, Fortune 500) and video rental company Netflix (NFLX).

The results from Netflix will be closely watched, in part due to massive run Netflix shares have had run this year -- up nearly 60%.

Analysts expect Netflix to post a profit of $1.12 a share, while Texas Instruments is expected to earn 53 cents per share.